Isilon Systems raises $20 million

By JOHN COOK, SEATTLE POST-INTELLIGENCER REPORTER

Published 10:00 pm, Tuesday, May 24, 2005

Seattle-based Isilon Systems, a 4-year-old company that stores digital content for media, entertainment and health care companies, has raised $20 million in one of the largest venture capital rounds in the state this year.

The money was raised in less than a month and more than doubled the valuation of the company.

"I think that is a great statement of what we have done so far and the opportunity in front of us," Isilon Chief Executive Steve Goldman said. "We have really been in the right place at the right time."

Focus Ventures led the round, with existing investors also participating. Total financing now stands at $59.9 million.

Founded by a former RealNetworks engineer in the midst of the Internet bust, Isilon Systems has quietly carved a niche in the growing field of digital content storage. It has done this while operating in the shadow of multibillion-dollar storage companies such as EMC, IBM and Network Appliance.

Goldman, who previously led sales and marketing at F5 Networks, said Isilon has a three-year head start on the competition in a market that is now approaching $1 billion. But he admits that Isilon's business model and clustered storage technology are no longer well-kept secrets.

Isilon's technology was featured last month in a prominent industry magazine, and the company was recently chosen by Red Herring magazine as one of the top 100 private companies in North America.

"Everyone definitely understands that this kind of information is critical to their businesses," said Goldman, who turned 45 on Sunday. "We are the only ones who have started with a clean sheet of paper and designed a storage system from the ground up for this new kind of data."

Some large customers are voting with their pocketbooks.

NBC and Sports Illustrated relied on Isilon's storage system to archive and manage digital videos and photographs during the 2004 Summer Olympic Games in Athens, Greece.

LexisNexis is using the technology to store hundreds of thousands of electronic legal documents, and Corbis turned to Isilon to create a central repository for its collection of digital imagery.

Isilon's biggest customer is Kodak, which has bought nearly a petabyte of storage -- or 1,000 terabytes -- to warehouse consumers' photos in the EasyShare Gallery. That service, formerly known as Ofoto, stores about 1 billion digital photographs.

More than half of Isilon's customers, including Kodak and Corbis, have placed repeat orders for the system, Goldman said. The company's system starts at $50,000, and he said the average sale is $125,000.

As it added new customers and expanded into new markets such as health care and energy, Isilon's revenues more than quadrupled last year. Goldman did not disclose specific sales figures or disclose when the company would become profitable. But he did hint that an initial public offering might be the next financing option.

The most recent venture round will be used to expand sales and marketing. Isilon, which nearly doubled its staff last year to 130 people, probably will not expand its staff as quickly as it did last year. Still, the company currently has 14 openings on its Web site.

Goldman, who said he loves David versus Goliath style battles, is confident that Isilon can break into the "old boys' network" that has dominated the storage industry for more than a decade.

"We are focused on building a big company because we have a big opportunity," he said.